There's A Huge Flaw In Yahoo's Monetization Plan For Tumblr

When we published a leaked copy of Tumblr's ad sales pitch deck on the day Yahoo acquired the social blogging site, you may have noticed some odd language on the last page: The part that says "non-targeted."

Why would Tumblr be offering "non-targeted" advertising for $200,000 per campaign?

We asked a Tumblr representative to tell us what the targeting options were for Tumblr's new "in-stream" ads that will show up in their dashboard newsfeeds. But we haven't heard back yet.

Three sources, however, tell Business Insider that Tumblr's ad targeting is in fact just as modest as the pitch deck suggests it is.

"Fairly dismal"

"It is fairly dismal," said one ad buyer. "I've never ever heard any of our customers ask about Tumblr ads, maybe a handful ask us about Tumblr analytics," with the exception of one standout client that the source declined to name.

Another source told us, "They don't know much about people [their members] and targeting is very, very limited. They only recently enabled targeting for U.S. only!"

One huge issue for Yahoo is that currently there is very little inside Tumblr to target. Users can get an account with an email address and by filling in their age. They don't have to provide any other identity information. Tumblr is thus filled with people using names that don't even identify them as male or female. It's the opposite of Facebook, which has dozens of "real identity" fields that gather targeting information from users.

Beena Kalaiya, associate director, strategic insights and social media at media-buying firm Optimedia, says that Tumblr doesn't provide the sort of metrics that advertisers are used to. "The analytics are better than they used to be, but not robust enough," she says. "I'm hoping that Yahoo helps in that respect."

Tumblr's ad sales deck (emphasis added): Click to enlarge.
Tumblr

(We also contacted Union Metrics, Tumblr's official content analytics company, for comment, but the company demurred — it focuses on content not advertising metrics.)

One targeting option Tumblr does have are the tags and text that users publish in their posts. Someone tagging a post with "soccer" is probably a soccer fan, and thus could be targeted with sports-relevant ads.

One source tells BI that this is a huge plus for Tumblr: "keyword search or running NLP [natural language processing] on the blog posts as well, to better target ads that Yahoo will obviously now drive [is] probably more relevant than any kind of registration data, in my opinion."

But even that kind of targeting is under-utilized, another source tells us: "There's not much targeting - basically U.S. or international, and mobile and/or desktop. No demo/context/interest opportunities yet," this source says. "Given the overall low reach versus Facebook and Twitter, Tumblr can't offer up much in the way of precise targeting because that sort of thing wouldn't scale for advertisers."

"They can match their data with Yahoo's"

A separate source says Yahoo's targeting know-how can only help Tumblr. "They can match their data with Yahoo's to improve targeting possibilities."

Yahoo has made two suggestions about hot it might target ads on Tumblr. The first is by utilizing its new Yahoo news in-stream ads. Those ads become more relevant to users as they search and read more Yahoo content.

It's easy to imagine how the relevancy of ads in Tumblr might increase based on the same mechanism.

The second way is via a Tumblr ad exchange. On the day of the acquisition, Yahoo CEO Marissa Mayer hinted she might create an ad exchange for Tumblr. Such an exchange works by dropping a tracking cookie onto the browser of any incoming Tumblr user. That cookie would signal to users that a new Tumblr user has arrived in the system. Advertisers could then see what other cookies that user might have collected from previous sites, and then target that user with ads inside Tumblr based on their browsing history.